In this paper, the dielectric spectrums of lignite during oxidation and its corresponding dielectric response mechanisms were investigated by means of THz-TDS and synchronous thermal analyzer, combined with the Clausius-Mossotti equation and chemical reaction pathway. Results indicate that dipole polarization is the dominant polarization mechanism during coal oxidation in the THz field. There are four dielectric response mechanisms, which gradually participate in the competition of polarity changes with the increase of oxidation temperature. The dielectric response of lignite shows significant temperature dependence. The dielectric constant first decreases until 150 °C due to the dewatering. From 150 °C to 275 °C, the dielectric constant tends to increase. Before 225 °C, the increase is due to the formation of more oxygen-containing bonds. Beyond 225 °C, the coupling effect of the formation of oxygen-containing bonds and the twisting deformation of the molecular chain skeleton become the main reason. Then, due to the fracture of polar bonds, the dielectric constant drops significantly until 400 °C. Beyond 400 °C, the dielectric constant increases, possibly due to enhanced electron migration. The outcomings of the current study help to identify the oxidation stage of coal and enrich the application basis of THz technology in the fields of coal fire identification and mineral processing.